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The effects of gallery and artist reputation on prices in the primary market for art

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  • Susanne Schönfeld

    (Department of Economics, Vienna University of Economics & B.A.)

  • Andreas Reinstaller

    ()
    (Department of Economics, Vienna University of Economics & B.A.)

Abstract

This paper advances a decision theoretical foundation for pricing scripts by means of a simple model of product differentiation implementing the undercut-proof equilibrium concept. We argue that while sociological factors play undoubtedly an important role, economic analysis can complement the insights from economic sociology on pricing in the primary art market. Our model analyzes the effects of the gallery's and the artist's reputation on the price the gallery charges. The results suggest that prices positively correlate with an artist's reputation and negatively correlate with a gallery's reputation. The model may therefore explain the results of recent empirical studies that have led to similar results.

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Bibliographic Info

Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp090.

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Date of creation: May 2005
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Handle: RePEc:wiw:wiwwuw:wuwp090

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  1. Gerard-Varet, Louis-Andre, 1995. "On pricing the priceless: Comments on the economics of the visual art market," European Economic Review, Elsevier, Elsevier, vol. 39(3-4), pages 509-518, April.
  2. Adler, Moshe, 1985. "Stardom and Talent," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 208-12, March.
  3. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, American Economic Association, vol. 67(2), pages 76-90, March.
  4. Holger Bonus & Dieter Ronte, 1997. "Credibility and Economic Value in the Visual Arts," Journal of Cultural Economics, Springer, Springer, vol. 21(2), pages 103-118, June.
  5. Martin Shubik, 2002. "Dealers in Art," Yale School of Management Working Papers, Yale School of Management ysm255, Yale School of Management.
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Cited by:
  1. Barbosa, Renata Leite & Campos, Nauro F, 2008. "Paintings and Numbers: An Econometric Investigation of Sales Rates, Prices and Returns in Latin American Art Auctions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6806, C.E.P.R. Discussion Papers.

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